After the stormy public reactions against the imposition of VAT on private education, the Greek government decided to withdraw the measure and replace it with another.

During his press conference yesterday, the Minister of Finance, Efklidis Tsakalotos, announced that planned revenues from the rejected measure will still materialise through the imposition of excise duty of €0.30 per bottle of wine. The aim is to collect revenue amounting to €100 million.

Wine fell within the cabinet's sight after the flop of the two previous proposals. The original idea was to increase VAT on beef, but it was quickly replaced by the proposal to introduce VAT on private school fees. But public outcry has forced the Finance Ministry to change its tack: the latest idea is to collect the cash by the introduction of excise duty on wine.

The decision provoked an expected reaction on behalf of the Greek Wine Federation, the members of which produce over 70% of the national wine output and account for over 90% of wine exports.

In an interview for GRReporter, the Federation's secretary general, Angelos Rouvalis, presented his colleagues' arguments against the planned measure. In his words, it will increase wine prices by over 50% and in turn will adversely affect hundreds of thousands of grape growers as well as employees across the 700 Greek wineries.

Mr. Rouvalis, what will be the consequences of the planned increase of the excise duty on wine?

Extremely serious, since, according to official statements by the minister, the suggested excise duty will amount to €0.30 per bottle of wine. This will double the production cost, taking into account that now the price of the grapes varies from €0.20 to €0.60 per kilogram. As a result, the final price will go up by at least 50%. All winegrowers in Greece, between 150 and 200 thousand grape growers, 700 wineries and their 15-20,000 employees – everybody will be affected.

But the problem doesn't stop here – it is much more extensive. The issue of excise duty on wine is so crucial because the debate over it is nothing new. It has many years of history at European level as well. And despite pressure from multinational alcohol corporations who wish to see wine being taxed, no European producer nation like France, Germany, Spain, Italy, Cyprus, Hungary and Greece, has succumbed to these taxes. These countries have long formed a group that opposes the introduction of excise duty on wine.

Excise duty has the following rationale: it is imposed on luxury commodities, on unhealthy goods such as cigarettes and hard liquor as well as on imported goods in order to reduce their consumption. This is why excise duty on wine only exists in Nordic countries such as Sweden or Finland. But no winemaking European country has backed down and introduced such a tax, despite all the pressure.

Therefore, the imposition of excise duty on a product, which is produced in Greece and is consumed by the middle class every day as it is part of the traditional food culture, will cause a precedent and boost the odds for its introduction across Europe. It will be so controversial as to introduce excise in a country of such an ancient wine tradition. This is unthinkable, especially taking into account the fact that the government does not dare to touch the illicit manufacture of tsipouro, which is sold freely without any duty. And since the cabinet is scared of the possible backlash if they messed with tsipouro, they rather lightheartedly decided to impose excise duty on wine. If such a tax is necessary at all, it should be slapped on tsipouro, which is hard liquor, not wine, which is defined as food. Both because it is on people's tables every day, and because it is a traditional product.

What are the key issues in your sector now?

This attempt to introduce excise comes at a time when over 80% of Greek wineries operate at a loss as a result of the economic crisis. Over the past 30 years, the wine-growing areas in Greece have shrunk by 50%. The problem with the imposition of excise duty is not that it affects our corporate interests. Wine is the key to our cuisine and high-quality tourism. The whole national effort to switch over to a higher level of tourism will be compromised.

There is criticism that Greek wines are not particularly competitive compared to wines from other countries. Do you agree with this, and if so, what stands in the way of Greek wine becoming competitive?

I do not entirely agree. In recent years, Greek wine has made big strides towards better quality. The quality vis-a-vis price ratio can be seen clearly on the US market, where it is even considered cheap given its quality.

In the casual wine category, we certainly lag behind the competition, and this is mainly due to the limited wine-growing areas in the country. According to official data, the average vineyard area of a Greek wine grower is 0.6 hectares, while in France it is 9 ha. In Australia, China and Chile, vineyard creation is free and winegrowers have large areas available, whereas in Greece we are struggling to sustain production from vineyards between 0.6 and 2 hectares. To boot, Greek vineyards are located in highland regions or islands and produce small quantities of grapes. In addition, the expenses in accessing and cultivating them are very high.

It is easy to understand therefore that the introduction of excise duty would disturb this fragile balance, after doubling production costs. It is logical that we become even less competitive.

What are the most competitive types of Greek wine on the world market?

Wines with a protected designation of origin and generally all quality Greek wines. We are losing ground in the lower category of bulk wines, which are often imported from Bulgaria, Macedonia and Italy at much lower prices. The reasons are the ones I highlighted. These countries have much larger vineyard areas, and some have much lower labour costs. We cannot possibly compete with them.

But in the category of high-end, high-quality wines, Greek ones are competitive. Our prices are very good vis-a-vis the quality of our product.

What measures do you intend to take to prevent the adoption of excise duty?

We've been up in arms since yesterday. We informed all political parties and parliament. One of the MPs already talked about the issue at today's session. During the day we will meet with the minister of agriculture, and I think he is ill-advised to accept this kind of measure. From there on, we have the support of a large part of society. We hope that we will gain the understanding of those who make the decisions as well.

GRReporter’s content is brought to you for free 7 days a week by a team of highly professional journalists, translators, photographers, operators, software developers, designers. If you like and follow our work, consider whether you could support us financially with an amount at your choice.